In new ad downturn, subscription salvation for some, gold rush for others

By now, the world was supposed to have emerged from the worst of the global economic storm that dampened advertising dollars through 2008 and 2010. But lingering European concerns suggest the ad dip is back, according to several company earnings disclosures this week.

As it returns, some publishers are congratulating themselves on having erected their flood defences – building digital products that consumers, rather than advertisers, pay for. But others are riding an advertising wave that’s still growing, pushing them to shores of sustainability they are convinced are becoming visible.

Financial Times

FT Group reported for the last half-year: “Our advertising revenues declined, as expected, with growth online and in luxury and personal finance more than offset by declines in trade and recruitment. Advertising demand remains volatile and visibility poor.”

But, just as FT.com MD Rob Grimshaw forecast to paidContent in May, FT digital subscriptions have now surpassed print circulation for the first time, after growing 31 percent from last year to over 300,000. That gives the publisher, which has long committed to reducing its advertising reliance, welcome shelter.

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New York Times

Similarly, at NYT Co’s main titles, Q2 ad dollars fell 6.6 percent but, following the introduction of an online metre now paid by 509,000 subscribers, circulation revenue rose 8.3 percent. That’s something New York Magazine calls an “historical rebalancing (which) may indicate a sea change in an industry that has long relied on advertising to stay afloat“.

Yell Group

The publisher’s printed listings directories have long been challenged by digital disruption; now even its digital advertising business is threatened. Despite a 13 percent jump in visitors, Yell lost two percent of its Q3 digital revenue because it has had to slash online business directory ad prices to keep customers, knocking a tenth of its average customer dollars. Company revenue is down by 15 percent.

To adapt, Yell is trying to add a new line in online services – not just conventional listings, which are becoming commoditised by web search, but also higher-value website building and SEO. This revenue grew 40 percent.

Ad dollars remain for new ideas

But not everyone is finding the advertising market so terrible. What the above have in common is that each is a “legacy” operator – each is judging the viability (or not) of advertising to sustain itself against historical highs, and trying to accommodate a new reality.

There is another category of company for which advertising, despite the global economic concern, still looks like a lucrative model – companies which are on a fresh or startup growth journey in to hitherto unmined territory…

Twitter, Tumblr, Facebook, Foursquare and others are embarking on an ad-funded trip for the first time, finding it to be laced with ever-growing returns. As new outfits, they have no memories of analogue ad boom days to recollect, only dreams of milking what, to them, looks like the onset of a new boom…

Even some news publishers are finding digital growth in an ad market rivals say is drying up…

But Mail Online and Metro.co.uk revenue is up 69 percent thanks to Mail Online’s audience growth, with other digital ad revenue up 15 percent.

Guardian News & Media

The Guardian.co.uk operator’s losses are mounting even as it transitions from print to digital in pursuit of an “open” journalism model that, some worry, has no economic underpinning. But annual digital advertising revenue has grown 26 percent to £14.7 million. The Guardian’s own media editor Dan Sabbagh sees it this way:

“That’s … solid enough progress – and the word from upstairs is that rate of growth has continued into the current financial year, that is through April and May.

“Web advertising is a volume game and a paywall British product is unlikely to win many overseas subscribers.

“There is still healthy double digit growth in digital advertising for at least a couple of newspapers. Once digital advertising revenues exceed £30 million – which should happen in 2013 for at least one title – that could amount to a level that a paywall only publisher cannot easily match.”

Something’s got to change

What unites Mail Online and Guardian.co.uk (and Twitter, Tumblr et al) is this – each is still growing advertiser-exposed eyeballs. The newspapers last year embarked on U.S. audience expansion; the social networks are ever-growing…

Growing the audience in this way beefs up ad sales but does little to tell us about the rise and fall of the ad economy. Instead of falling mercy to the external ebb and flow of advertising economics, these publishers have changed their own economics by identifying new seams to tap for an otherwise diminishing resource In other words – to find growth, operators have to change some condition.

Some publishers are finding personal success in subscriptions, others in growing the ad pie. But staying still and hoping for an ad up-turn is not an option.